On Clamorworld, we have raised the need for urgent reforms in India several times. Again and again we have reiterated the fact that the BJP’s best bet to sustained success amongst the electorate is to not forget the mandate they were elected to power on-Change, Reforms & Immediate Action!

Slowly but surely the direction of reforms seem to be taking a turn for good, perhaps what Mary Poppins referred as the ‘Winds Of Change’. Yes I am talking about the slew of reforms that the Modi Government set into motion soon after their Bihar debacle. The Union Cabinet has approved the financial restructuring of DISCOMs or the power distribution companies. Chaired by Shri Narendra Modi, the Ujwal DISCOM Assurance Yojna or popularly known as UDAY is being touted as more than mere financial restructuring. Many market experts believe this could kick off a realistic revival of the debt laden power distribution majors and provide a sustainable long-term solution for them.

Armed with a multi-pronged approach, this project is looking at a comprehensive revival of the sector. It aims to:

-Boost operational efficiencies

-Significantly reduce the cost of power

-Ensure that the DISCOMs embrace financial disciplines

-Reduce the interest cost and thereby the resultant cost outgo for DISCOMs

On the face of it thought it might seem that it is mere shifting of debt burden to the states, the reality is what other options the states have if they want un-interrupted power supply? On the contrary this shifting of 75% of the DISCOM debt burden to the states’ balance sheet will result in an immediate reduction of 3-5% interest cost. Some select states will also get the option to sell the remaining 25% as power bonds or loans with a interest rate of G-sec plus 50 basis points.

The Govt also plans to ease out norms for the State Governments enabling them to borrow more to tackle this additional burden. The plan envisages these power utilities breaking even in 2-3 years and thereby creating a win all situation for the various stakeholders. Operational efficiency that is being targeted is also set to reduce electricity loss from the hair-raising 22% currently to around 15% over the next 2-3 years and further boost their financial viability. Most importantly the consumer will stop paying the price for the inefficiency of these DISCOMs. The onus will now directly shift to the State Governments to make them financially viable.